Correlation Between DAX Index and Gecina SA

Can any of the company-specific risk be diversified away by investing in both DAX Index and Gecina SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DAX Index and Gecina SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DAX Index and Gecina SA, you can compare the effects of market volatilities on DAX Index and Gecina SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DAX Index with a short position of Gecina SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAX Index and Gecina SA.

Diversification Opportunities for DAX Index and Gecina SA

-0.61

Correlation Coefficient

DAX Index  Gecina SA

Excellent diversification

The 3 months correlation between DAX and Gecina is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index and Gecina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gecina SA and DAX Index is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DAX Index are associated (or correlated) with Gecina SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gecina SA has no effect on the direction of DAX Index i.e., DAX Index and Gecina SA go up and down completely randomly.

Pair Corralation between DAX Index and Gecina SA

Assuming the 90 days trading horizon DAX Index is expected to generate 0.61 times more return on investment than Gecina SA. However, DAX Index is 1.63 times less risky than Gecina SA. It trades about 0.35 of its potential returns per unit of risk. Gecina SA is currently generating about -0.18 per unit of risk. If you would invest  1,900,478  in DAX Index on September 21, 2024 and sell it today you would earn a total of  96,508  from holding DAX Index or generate 5.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DAX Index  vs.  Gecina SA

Pair Trading with DAX Index and Gecina SA

The main advantage of trading using opposite DAX Index and Gecina SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index position performs unexpectedly, Gecina SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Gecina SA will offset losses from the drop in Gecina SA's long position.

The idea behind DAX Index and Gecina SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.